Statement from Franklin Advisers, Inc. and OppenheimerFunds Regarding the First Circuit Invalidating Puerto Rico’s Debt Enforcement and Recovery Act
NEW YORK–(BUSINESS WIRE)–The following is a statement from Franklin Advisers, Inc. and OppenheimerFunds:
“follows straightforwardly from the plain text and is confirmed by both statutory history and legislative history”
The United States Court of Appeals for the First Circuit on July 7 unanimously ruled for bondholders when it invalidated Puerto Rico’s Debt Enforcement and Recovery Act as pre-empted by the Federal Bankruptcy Code. Puerto Rico had adopted the Act to compel a restructuring of over $18 billion in bonds issued by the Commonwealth’s electric, sewer and highway corporations. The decision protects bondholders across the United States from Puerto Rico’s now-void statute and from any other state attempting to enact a similar statute. The First Circuit found that Congress had reserved to itself the power to authorize a bankruptcy proceeding for Puerto Rico’s municipalities. The Court held that preemption “follows straightforwardly from the plain text and is confirmed by both statutory history and legislative history,” and rejected the Commonwealth’s “unsound and unsuccessful alternative readings.”
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We continue to work with the Commonwealth and Puerto Rico’s electric company toward a mutually agreed upon revitalization plan, and expect to work with the Commonwealth generally to develop reforms that holders of Puerto Rico’s bonds can support.
Kramer Levin Naftalis & Frankel, LLP
Amy Caton, 212-715-7772